Lesson 54 - Advanced Accounting Course

Lesson 54: Internal Audits vs. External Audits

🧠 What Is an Audit?

An audit is an independent examination of financial information or internal processes to ensure they are accurate, compliant, and trustworthy.

There are two main types of audits in accounting:

1. 🔎 Internal Audit
   
   

2. 🧾 External Audit
   
   

Both are essential, but they serve different purposes and are conducted by different people.

🔍 Internal Audit

Conducted by: The company’s own employees (internal audit team or department)
Purpose: To help management improve internal controls, efficiency, and compliance

✅ Internal audits are preventive — they find and fix issues before they become serious.

🧾 External Audit

Conducted by: Independent, third-party auditors (e.g., PwC, Deloitte)
Purpose: To provide an unbiased opinion on the accuracy of a company’s financial statements

✅ External audits are detective — they help verify and give credibility to financial info.

🧾 Side-by-Side Comparison Table

🧱 Example Scenario

Let’s say your company is preparing its annual financial report.

1. Internal auditors check if:
   
   

   • Employees follow procedures 🔍
     
     

   • Transactions are recorded properly 🧾
     
     

   • Assets are protected 💼
     
     

2. External auditors then:
   
   

   • Test samples of transactions 📊
     
     

   • Verify balances in financial statements 💰
     
     

   • Provide an audit opinion in the annual report ✅

✅ Summary